QUESTION: 33

Sarah is a baker and orders free-range eggs from a local supplier which she uses to make cakes. There is a contract in place which included a specification that states that the eggs must be free-range. One day the supplier delivers eggs which Sarah uses in the cakes. Later she dis-covered that these were not free-range. Sarah believes that the supplier has broken the con-tract. Is this true?

Yes- this is a breach of a condition
Yes- this is a fundamental breach
no- the specification is not a contract document
no - there has been a breach in a warranty

Answer(s): D

Explanation:

"No- there has been a breach in warranty" is the correct answer. The key to answering this question lies in the fact that the specification in this example is a warranty rather than a condition of the contract. P.45 of the study guide explains that the Sale of Goods Act has implications on whether or not a specification is a condition, warranty or innominate term and it's all about whether the product is in 'good condition' and can be used for its intended purpose. In this example the eggs were used for their intended purpose and were in good condition (or Sarah wouldn't have put them in the cakes). Therefore in this example, the eggs needing to be free-range is a warranty of the contract not a condition. Therefore options A and B are both wrong. Answer C is also wrong because the question mentioned that the specification was included in the contract. If you want to know more about the implication of the Sale of Goods act on specifications see p.45.

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QUESTION: 34

Popsi Cula is a manufacturer of sugared beverages and produces over 5000 tonnes of soda each day. It is extremely important that ingredients are delivered to the factory on specific days in order for the production to keep to its very tight schedule. Popsi Cula is onboarding a new supplier - which of the following clauses would it be important for the contract to contain?

liquidated damages
limitation of liability
time is of the essence
KPIs

Answer(s): C

Explanation:

A Time is of the Essence Clause should be included. This stresses the importance of obligations being completed on time, with any delays (e.g. in delivery of ingredients) being treated as a breach of a condition. The other three options are probably important to have in a contract, but don't relate specifically to this example. See p.45 for more information on Time is of the Essence Clauses

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QUESTION: 35

A buyer and supplier have a contract and the supplier has committed a major breach. However, as they are the sole supplier to the buyer, the buyer has decided not to terminate the contract and instead to work with the supplier to remedy the situation.
What is this called?

affirmation of the contract
conflict resolution
awarding damages
assigning liability

Answer(s): A

Explanation:

This is affirmation of the contract.
When a breach occurs the injured party has two options; termi- nate the contract or affirm the contract. In this example they have affirmed the contract- they have chosen to continue working with the offending party. See p.60.

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QUESTION: 36

Which of the following is usually the default method for resolving disputes?

litigation
mediation
negotiation
conciliation

Answer(s): C

Explanation:

Negotiation is usually the default method for resolving disputes. This is a direct quote from p.63

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